FAMILIES face tax rates higher than millionaires when child benefit is scrapped for some households, a report claimed yesterday.

And axing child benefit for more than one million families will reduce the tax system to “incoherence”, think-tank the Institute for Fiscal Studies warned.

From Monday, homes where one person takes home more than £60,000 a year will lose all of their benefit. Where the highest earner is on over £50,000 they will lose part of the benefit for every extra pound they earn.

The IFS estimates some families earning £50,000 to £60,000 will face marginal tax rates of 65 per cent, especially if they have more than one child.

The biggest concern is the incoherence that it creates within the welfare system. It is unclear whether the net effect of all this will be to improve it.

Institute for Fiscal Studies spokesman Robert Joyce

It said the policy created “a series of administrative complexities” with an estimated 500,000 people having to fill in a tax return to repay the benefit.

Spokesman Robert Joyce said: “The biggest concern is the incoherence that it creates within the welfare system. It is unclear whether the net effect of all this will be to improve it.”

Under current tax rates, for every extra pound families earn over £50,000, they keep 60p. But from Monday they will keep less, depending on how many children they have.

A family with one child will only keep 49p above £50,000. But for those with three children it will be just 35p – a marginal tax rate of 65 per cent.

HM Revenue and Customs estimates that some 1.2 million households will be affected by the measure which aims to save around £1.5billion this year.

Labour Shadow Treasury Minister Chris Leslie said the report highlighted “the massive complexity of this unfair policy” while nearly a third of affected families had yet to be told and faced filling out a self-assessment tax return.

The Treasury said: “Looking at marginal rates in this way is misleading as the charge simply withdraws some or all of the money that has been paid in child benefit. No one will be taxed more than the benefit they receive.”